How Strategies to Reduce U.S. Bilateral Trade Deficits in Manufactures Affect U.S. Agricultural Exports

Recent U.S. policy debate has focused on reducing U.S. bilateral trade deficits in manufactures with Japan and the European Community (EC). This paper analyzes how different policies would affect U.S. agricultural exports. The analysis uses a static equilibrium world model for disaggregated agriculture, aggregated Armington-type manufactures, and aggregated nontraded goods. Agricultural exports tend to be hurt least by foreign liberalization of manufactures trade and hurt most by U.S. imposition of retaliatory protection on manufactures, although both these policies improve U.S. bilateral trade deficits. By contrast, a 10-percent devaluation of the dollar helps agriculture and induces the largest improvement in bilateral trade deficits